Public Bill Committee

[David Taylor in the Chair]

Clause 5

Approvals

Amendment moved (this day): 19, in clause 5, page 3, line 36, at end add
(3) Approved account providers must be persons who are regulated by the Financial Services Authority under the Financial Services and Markets Act 2000.
(4) Regulations may limit approved account providers to persons from any or all of the following
(a) Banks;
(b) Building Societies;
(c) Friendly Societies;
(d) Credit Unions;
(e) Industrial and Provident Societies;
(f) Post Office Ltd..(Dr. Ladyman.)

Question proposed, That the amendment be made.

Ian Pearson: It is a pleasure to serve under your chairmanship, Mr. Taylor.
I will respond to amendment 19, which was moved by my hon. Friend the Member for South Thanet. I assure him that we share his concerns that providers of saving gateway accounts should be appropriately regulated. As he and other hon. Members will see from the draft regulations, we intend to make it a condition of approval that account providers fall within the UK or are other European economic area providers and have the appropriate permission to accept deposits under the Financial Services and Markets Act 2000. A non-EEA provider must be authorised to accept deposits through a UK branch.
It is too early in the process to confirm any saving gateway providers. The Government are in discussion with them, though, and wish to see a wide range of choice of providers. My hon. Friend said that the scheme should only be provided through the Post Office and friendly societies. We are keen to encourage the Post Office to consider offering saving gateway accounts. Some friendly societies may like to participate, but their qualifying would depend on their having the appropriate permission to accept deposits.
My hon. Friend asked whether we have the power to ensure that there is appropriate regulation. I refer to clause 4 (1) which stipulates:
A Saving Gateway account may be held only with a person (an approved account provider) who has been approved by the Commissioners in accordance with regulations.
It will be through regulations that we have that power. It is our view that we should not limit the provision of gateway accounts, and we would like to see some choice in that area.

Stephen Ladyman: I welcome you to the Chair, Mr. Taylor.
I think that my hon. Friend has misunderstood me. I appreciate that he wants a plurality of providersthat is all right. If he were to decide in future that he did not want that plurality and that he wanted to limit this to the Post Office, because we wanted to encourage it, is he confident that the Bill would allow him to do that without being challenged by the banks? My concern is that the commissioners could say that the Post Office is to be the only provider, but the banks might be able to challenge that. Is he confident that they would not?

Ian Pearson: We are discussing an essentially hypothetical point. One of my objectives over recent months has been to encourage the banks to offer saving gateway accounts. Some of banks view these accounts as marginal. The situation that my hon. Friend poses is not likely to arise, but there would be flexibility under the secondary legislation to do what he wants in the unlikely event that the Government consider that an appropriate thing to do.

Stephen Ladyman: It might be unlikely that the Government would want to do such a thing, but I might want to get myself on the Statutory Instrument Committee and argue that the provision should be limited to the Post Office. If that happens, I do not want my hon. Friend to stand up and say, Oh, you cant do that under the legislationit would be challenged by the banks. I am simply asking him whether he is confident that it could be restricted to one of those categories of organisation if it were the will of Parliament to do that in the future?

Ian Pearson: I have already confirmed that we have the flexibility to do as my hon. Friend proposes, but I have also indicated that the Government would certainly not be minded to go down that route and that we want a plurality of provision.

Jeremy Browne: I welcome you to the Chair, Mr. Taylor.
I urge the Economic Secretary to be cautious about giving too big a concession to the hon. Member for South Thanet. Although I accept that the account is exactly the sort of product that the Post Office could and perhaps should offer, there are two potential attractions in banks offering it. First, it would provide an incentive for people who already have bank accounts to open saving gateway accounts with their banks. Secondly, it would give people who do not fall into that category an opportunity or incentive to engage with the banking system in a way that some people on low incomes do not at present. That would be to their benefit. If they were restricted to friendly societies and the Post Office, they might not get the wider benefitsin time, as they acquired the savings habitof engaging with the banking system in the way that the clause might give them the opportunity to do.

Ian Pearson: The hon. Gentleman makes a valid point. That is something that my hon. Friend the Member for South Thanet might want to take into account, given that his amendment would allow regulations to restrict further the types of financial institution approved to offer saving gateway accounts. As I said, I do not think that that is necessarywe will have that flexibility in secondary legislationbut I will explain that our objective is that savers should be able to choose from as wide a range of appropriately regulated and authorised account providers as possible. That is why we have been in discussion with a range of potential account providers and their representatives.
We have already announced that the Post Office has agreed in principle that the accounts will be available through it, but I do not think that it would be in savers best interests or fair to potential account providers to reserve the provision of saving gateway accounts for one or more types of institution. I am afraid that I disagree fundamentally with my hon. Friend, but if he wants to have another go, I will happily give way.

Stephen Ladyman: I was only going to point out to my hon. Friend that a Cabinet memberI cannot quite recollect which one it was, but I think that it was the Secretary of State for Business, Enterprise and Regulatory Reformsaid at the weekend that he wished the Post Office to develop into a peoples bank. It might therefore become Government policy to limit the accounts to that single provider. I am only asking my hon. Friend the Economic Secretary to ensure that the legislation will allow the Government to do that if that is what they decide to do.

Ian Pearson: I have already indicated the flexibility of the legislation at the moment. I point out to my hon. Friend that the Secretary of State for Business, Enterprise and Regulatory Reform is a strong supporter not only of the Post Office, but of competition. It is in savers best interests to have as wide a choice as possible. We hope to persuade a range of institutionsnot just the Post Office and provident and friendly societies but credit unions, which are keen to offer saving gateway accounts. We think that that wide range of provision will be welcomed by the sort of people whom we are trying to encourage to save for the future.

Mark Hoban: I welcome you to the Chair, Mr. Taylor.
Perhaps I can help the Minister by referring to the evidence[Interruption.] He is doing a good job, but I just want to give him some more ammunition to deal with the hon. Member for South Thanet. When Alan Cook, the managing director of the Post Office, came before the Committee to give evidence last week, he said that he needed a partner to operate the saving gateway accounts and was looking for a bank or building society to act as that partner. Even the Post Office does not believe that it can operate the accounts in isolation. It will need someone else to help it to provide administrative support and so on to deliver the accounts. It seems odd to restrict provision to the Post Office if the Post Office itself recognises the need for support from other parts of the financial services sector to deliver the accounts.

Ian Pearson: The hon. Gentleman makes a valid comment about what the Post Office has been saying. I repeat that we are still in early days of saving gateway accounts. It is a matter of principle that choice is a good idea and that there should be the plurality of provision that I have been talking about. There will be flexibility to change matters in secondary legislation. That is right and proper. I do not want to restrict things in the way that my hon. Friend the Member for South Thanet wants, but I agree with him that it is important that the regulation is appropriate and proportionate. The legislation will ensure that that is the case.

George Mudie: When we were taking evidence, it was mentioned that the Post Office was very keen on the work and that it was probably looking for a partner in the banks to do a lot of the administration. Perhaps the Economic Secretary can reconcile that. I am surprised at the schizophrenic approach of the Government to the Post Office. The Post Office had profitable passports and driving licence businesses, but the Government put them out to tender. They were lost to the Post Office, thereby contributing to its weakness, and that caused a few thousand post offices to be closed. The Post Office is looking for business, but, first, that business is not being put out to tender, which is interesting, and secondly, there is no suggestion that sympathy or a strategy has been worked out to give the Post Office business that would help the network and keep it afloat, as well as providing a big footfall.

Ian Pearson: We are trying through the Bill to encourage and support working-age people on low incomes to get the savings habit. We therefore have a framework of legislation that will provide opportunities for people to do just that. We hope to set up a system whereby, through the match fund, individuals will have an incentive to open saving gateway accounts. We want those accounts offered by a range of financial institutions. It has been mentioned that the Post Office might want to partner with the banks. It might also want to partner with one or a number of credit unions. Flexibility and diversity in the marketplace would be welcomed.
Mr. Jim Devine (Livingston) (Lab) rose

Ian Pearson: I happily give way to my hon. Friend who knows a great deal about credit unions.

David Taylor: Order. I congratulate the hon. Member for Livingston on becoming a grandfather today for the first time, to Erin Molly Devine.

Jim Devine: The champagne is on me, Mr. Taylor.
My hon. Friend the Economic Secretary is right. I have been investigating credit unions. They cover only 1 per cent. of the population in England and 2 per cent. of the population in Scotland. In Ireland, they cover 70 per cent. of the population. It was interesting that the Irish Government did a similar project about 10 years ago, which worked very successfully, because the credit unions were embedded in local communities. We have post offices that are embedded in local communities. Why do we not use them?

Ian Pearson: I, too, congratulate my hon. Friend.
I entirely take my hon. Friends point; he is right to say that there is a strong credit union movement in Ireland and that credit unions are often focal points in local communities. He also right that post offices can also be key focal points in individual local communities. That is why we are pleased about the fact that the Post Office has said, in principle, that it wants to operate saving gateway accounts. At the moment, it does not have a banking licence, which is why we probably need to have discussions with the banks. However, we should not regard saving gateway accounts as something that we would only want people to access through their post offices. As I have said, credit unions, despite the fact that they do not have big coverage in the United Kingdom, are very keen to offer saving gateway accounts, and I think that we should provide the flexibility to enable them to do so.
It is also the case that we ought to look at other mainstream providers, most notably the banks and building societies. There would be additional advantages if those banks and building societies wanted to come on board and offer saving gateway accounts too. It would not be appropriate to exclude them, which is why I urge my hon. Friend not to press the amendment to a Division.

Stephen Ladyman: I notice that our deliberations were joined briefly by the deputy Chief Whip. He has obviously got wind that there is a major rebellion going on here in Committee Room 9.
My hon. Friend the Economic Secretary has given me the assurance I sought that all these accounts will be covered by appropriate protection measures and that people will have recourse to the Financial Ombudsman Service if they need it. That is one assurance that I wanted to put on the record.
I accept entirely that my hon. Friend is seeking a diversity of providers. All I wanted was to obtain a reassurance that, if he were to change his mind and not seek a plurality of providers, he would have the power to do that. He has given me that assurance too. I ask him not to rule out the possibility that we may wish to limit these accounts to the Post Office and perhaps to credit unions in the future. There are arguments in favour of that; I agree that there also arguments in favour of there being a plurality of suppliers.
The Post Office said that it was looking for a partner; it did not say that it wanted to get one from the banking or building society world. My understanding is that it was simply looking for a partner. Perhaps National Savings & Investment could be that partner.

Mark Hoban: Alan Cook said last Tuesday:
That partner might well belong to one of the other associations at this table.[Official Report, Saving Gateway Accounts Public Bill Committee, 27 January 2009; c. 27, Q49.]
Of course, it may well be the case that he will rely on the Association of British Credit Unions, but for the coverage reasons that have already been mentioned, perhaps it will be the banks and building societies that he will look to when he forms a partnership.

Stephen Ladyman: Alan Cook may well have been looking for a partner from those associations, but, equally, he may well have not been. There might be other options. All I am seeking is an assurance, which I believe I have received, on what will happen if the Government were to conclude that they would like to limit the provision of the accounts to the Post Office.

Mark Hoban: Surely one of the findings of the pilotsit was a point that was also made in the evidence session last week, not by the potential account providers but by some of the witnesses that we heard from in the morningwas that it is important to ensure that there is accessibility. One of the pilots found that the closer that people were to the account provider, the more likely it was that they would take up the accounts. Therefore, what we would be looking for is as many providers as possible, so that we increase accessibility and as many people as possible can take up the accounts. Surely that is something that hon. Members on both sides of the Committee can agree on. By restricting provision to one set of providers, the risk is that we will limit accessibility and work against the principle behind the Bill, which is to encourage a savings culture among people of working age on low incomes.

Stephen Ladyman: I agree with the hon. Gentleman that accessibility will be an important factor, but it is also worth noting that the Government are putting a great deal of money into this scheme. If they can get more bang for their buck, they might wish to do so, and the bang that they might be seeking is to use this scheme to encourage the use of the post office.
Conservative Members have been banging on for years now about how we must stand behind the Post Office. All I am saying is that if it were to become the policy of the Government that they wanted to use the saving gateway accounts system to help the Post Office to build up its footfall and customer base by limiting the access to these accounts to the Post Office, they ought to ensure that they have the power in the Bill to do so. I am not suggesting that it is the Governments policy. I am not suggesting that it is a desirable thing to do at the moment. However, we should ensure that we have got the power.

Jeremy Browne: I understand the hon. Gentlemans point, although I sympathise more with the Economic Secretarys point of view. I want to be clear in my mind whether the hon. Member for South Thanet can envisage a scenario whereby the Government would terminate accounts that were held with banksperhaps halfway through the two-year periodand order those accounts to be transferred to a monopoly supplier. There are potential risks, even if the Government only notionally have that power, of intervening in a way that may cause a lot of disruption.

Stephen Ladyman: That is not what I am suggesting at all. What I am saying is that at the outset of these accounts, it may be desirable for the Government to limit them to the Post Office. One of the things that struck me about the attitude of the banks when they gave evidence to the Committee was the clear implication that they do not like poor people very much. They are quite keen on regular savers, they are quite keen on people, such as MPs, who have a bob or two, but they are not very keen on those accounts that do not provide them with a very big profit.
It may well become Government policy to encourage to a greater extent those providers who will service people on low incomes and who will encourage people with just a small amount of money to save with them, and that might be the Post Office. All I am suggesting is that the Government might wish to consider the possibility, at the outset of the scheme, that they limit the provision to the Post Office and the Post Offices partner, whoever that might be, in order to encourage footfall into our post offices and to help support the post office network. I am not suggesting that that is Government policy. I am not suggesting that that is what they will do. I simply want to make sure that they have the power to do that at the outset if that is what they choose to do. My hon. Friend has given me that assurance, so I am content, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 ordered to stand part of the Bill.

Clause 6

Account opening

John Howell: I beg to move amendment 38, in clause 6, page 4, line 10, at end insert
(4A) An account provider may not unreasonably refuse to open an account for an eligible person..
I want to probe in a little more detail a subject that we briefly touched on this morning. As the British Bankers Association website is at pains to point out,
no bank is obliged to open an account for anyone.
The situation that I envisage with the amendment is one in which a person has a notice of eligibility and goes to a bank, which refuses to open an account. As was hinted at this morning, that could occur if the banks procedures for opening an account are complexanyone who has tried to open a bank account recently will have found out that it is complex and does not portray the good side of saving. Even the requirement for normal proof of identity may not be straightforward. For example, utility bills are often in one partners name, rather than both, making it difficult to produce a utility bill in ones own name. That may occur for reasons that are practical, financial, or even cultural, as was also hinted at this morning.
We need to have some idea of where the line will be drawn in the exercising of discretion by the banks. Does the Economic Secretary envisage that the current general unwillingness of banks to open accounts for former bankrupts or those who have had county court judgments against them will be allowed to apply? In themselves, saving gateway accounts should be a safe bet, but I see from draft regulation 13(5)(c) that he is bringing normal money-laundering requirements to bear on those accounts. Indeed, banks may be less willing to see those accounts as safe is there is a feeling that they may be swung into an individual savings account or some other form of financial instrument at the end of their life. I heard the Economic Secretarys general assurances about that this morning, but I hope that he will welcome highlighting the more specific concerns about this aspect of the Bill.

Ian Pearson: Clause 6 concerns the rules and processes at account opening, and is designed to ensure a consistent and simple process for applicants while providing for some basic checks on an applicants eligibility for the saving gateway. I share the hon. Gentlemans concern that eligible people should not be unreasonably deterred from opening an account with their preferred account provider, the phrase he uses in his amendment. However, I would be surprised if, having opted to offer saving gateway accounts, an account provider chose to decline to offer accounts to eligible people unreasonably, many of whom would be potential new customers.
I assure hon. Members that we will work closely with potential account providers and others in the run-up to the launch of the scheme, to explore how eligible people can most easily access accounts, consistent with the account providers normal account-opening checks. However, to put the position beyond doubt, subsection (3) requires account providers to open a saving gateway account for all eligible applicants, as long as the application is made in accordance with the rules set out in the Bill and in regulations. Moreover, we intend to make it a condition of approval to offer saving gateway accounts that a provider undertakes to accept properly completed applications from eligible people who have received a notice of eligibility. That is in the draft regulations. However, those requirements are subject to certain limited and necessary exceptions, to be specified in the regulations.
I hope that hon. Members will agree that it is reasonable that account providers should not be required to open an account when they have reason to believe that the notice of eligibility presented is, or may not be, genuine, that a declaration or application contains matters that are, or might be, untrue, or when they are unable to satisfy any requirements of money laundering legislation. As hon. Members can see from the draft regulations,those are the circumstances in which we propose that account providers can refuse to open an account for an eligible person who is prepared to agree to the terms and conditions under which the account is offered. We would expect them to vary to some extent between providers. However, I wish to stress that we will continue to discuss that in detail with potential account providers and others, and that we recognise that concerns have been expressed.

Stephen Ladyman: There was a hint in the evidence sessionalthough without going through, the transcript I cannot put my finger on where I got this impressionthat some of the banks might wish to limit the gateway saving accounts to people who already have some sort of account with them, such as a basic bank account. Is my hon. Friend saying that they will not be allowed to do that? One of the banks certainly gave the impression that it would only market to existing account holders. Does he have a view as to whether providers should market more widely than their existing customer base?

Ian Pearson: From my discussions with the banks, I do not recognise the hint that my hon. Friend mentions. One of the objectives of the legislation is to encourage people to start the savings habit. We do not want to see people who have already been saving simply transferring savings into a gateway account. People might have bank accounts in which they have not been saving, and they might then start to save for the first time. We would want to encourage that, but one of the purposes of the legislation is to encourage more people to save for the first time, whether through a saving gateway account offered by a bank or through one offered by another financial institution. A variety of provision is important.

John Howell: The Economic Secretary gave sensible examples from the regulations. They related to fraud in the forms and the unlikely event of money laundering being involved. Will he give examples of what he considers acceptable and unacceptable practices for the banks own systems, which go beyond that?

Ian Pearson: In short, we need to have further discussions with the banks and other providers on this issue. With regard to amendment 38, it is difficult to see what a general requirement that account providers
may not unreasonably refuse to open an account for an eligible person
could add to the approach that we are adopting. It raises questions about whether a refusal to open an account was unreasonable and what criteria should be used in reaching that decision, so it would create uncertainty.
We believe that the approach that we have set out will provide an easily understood and workable set of rules for account providers. The hon. Gentleman will find that they have been closely modelled on the child trust fund regulations. We will, however, want to keep the rules under review and they would potentially need to be updated by the Government without primary legislation, which is why the amendment is not acceptable. In the run-up to the scheme launch, it will be important for us to continue to work closely with providers and advice-giving bodies to balance the requirement that opening an account should not be an obstacle to savers with the need for account providers to carry out normal account-opening checks on the identity of the applicant and to receive the assurances that they rightly expect.
This issue will be the subject of further discussion. If any changes are needed to the draft regulations, we will consider them at a later date. As hon. Members will be aware, the draft regulations are subject to the affirmative procedure. I hope that the hon. Member for Henley will accept that it would not be appropriate to put the proposed provision in the Bill and that he will seek leave to withdraw the amendment.

John Howell: I am glad to hear that the Economic Secretary shares my concerns about the issue. I have listened to what he has to say and I accept his assurances that the matter will be raised again and will be raised with the banks as we move nearer to the implementation of the measure. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mark Hoban: I beg to move amendment 30, in clause 6, page 4, line 11, leave out subsection (5) and insert
( ) Regulations shall make provision preventing a person from holding more than one Saving Gateway account during the persons lifetime..

David Taylor: With this it will be convenient to discuss amendment 7, in clause 6, page 4, line 11, leave out subsection (5).

Mark Hoban: Subsection (5) enables the Government to make regulations about the number of saving gateway accounts that someone may hold at any one time, about a gap between the end of the maturity period of an account and another account being opened and about whether people can hold more than a specified number of saving gateway accounts, or saving gateway accounts that are held until the end of the maturity period, during the persons lifetime. That is a very permissive set of regulations.
I think that the Minister said on Second Reading that people would be entitled to have only one saving gateway account, and in our evidence session last week the issue was raised again, particularly with the people who gave evidence in the morning. Mr. Brian Pomeroy, who chairs the financial inclusion taskforce, said that
it is right that they get only one shot, because the basis of the scheme is that it should be a kick-start. If it fails, it does not work.[Official Report, Saving Gateway Accounts Public Bill Committee, 27 January 2009; c. 18, Q38.]
The sense that we got from his evidence was that he would expect people only to ever have one saving gateway account, because if they did not develop a savings culture based on the experience of holding one account for two years, they were unlikely to develop such a culture by being given the opportunity to hold a second account or even to be able to open one in year 1 and a second one in year 2. There was a clear sense from Mr. Pomeroy that one account should be sufficient to generate a savings culture. Sharon Collard, who took part in the evaluation of the first pilot, argued that one account was appropriate from a different perspective and that simply having one account would limit the cost to the Exchequer. Amendment 30 would reflect in the Bill the apparent consensus among those taking a close interest in financial inclusion that one account is enough.
The Economic Secretary will perhaps argue, as he has done in earlier sittings, that he needs flexibility and wants to be able to change his mind in the light of experience. All those arguments have been well rehearsed. The Government sent out a clear signal on Second Reading, and there was a clear signal from the evidence session. This may be one area where the Minister could be persuaded to set some of the parameters in the Bill, rather than for ever relying on secondary legislation. I am not sure whether that is the thrust of the amendment 7, tabled by the hon. Member for Taunton. We will hear his arguments in a minute. We need to be clear how many accounts we expect people to have over their lifespan, and understand why that is not in the Bill and why has it been left to secondary legislation.

Jeremy Browne: Amendment 7 which is being considered at the same time as amendment 30 is in my name. I concede that it is a rather blunt instrument. It deletes the whole of subsection (5). Perhaps I could have made these comments in a stand part debate rather than specifically to an amendment, but this nevertheless gives me an opportunity to make a similar point to the one just made by the hon. Member for Fareham. I have some unease that so much of the Bill is left to regulations that will be introduced at a later date. I was slightly uneasy when we discussed the clause 5, as the hon. Member for South Thanet seemed keen that, once we had completed our deliberations in Committee, and the Bill was back in the main Chamber to be approved by Parliament, the Government would go away and change the nature of the legislation. [Interruption.] Well, that is what I took him to be encouraging the Minister to do to retain flexibility, even when we had approved the measure in its existing form.

Stephen Ladyman: I hope that the hon. Gentleman is not accusing me of inappropriate exploitation of parliamentary procedures. I was simply asking for powers to be included in the Bill so that they could be used quite properly at a later date through regulation. The regulation and the statutory instrument process is as much a part of the parliamentary procedure as anything else we do in this place. It is perfectly reasonable to use it at a later date if one wishes to do so.

Jeremy Browne: I am grateful for that clarification. I think that most Members of Parliament would accept that a degree of flexibility in most legislation is desirable, but I am uneasy that the Bill allows so much flexibility that it would be possible for the Government, after the measure had been approved by Parliament, fundamentally to change the nature of the scheme as it would apply to my constituents and those of other Members. That is what I am driving at with my amendment.
Subsection (5)(a) is not too bad, but subsection (b) specifies
a period, after the end of the maturity period of a Saving Gateway account held by a person, during which the person may not open another Saving Gateway account.
That period could be one week, or it could be 20 years. It could be never, or it could be beyond anyones realistic lifespan. That seems to be allowing too much flexibility. Regulations may be made under subsection (c),
preventing a person from holding more than a specified number of Saving Gateway accounts, or Saving Gateway accounts which are held until the end of the maturity period, during the persons lifetime.
Something that is
more than a specified number
could be anything. The regulations might as well have said, The Minister may at any point decide all the details of the scheme, in which case we could get on with wafting it all through without having any understanding of what is intended. As the hon. Member for Fareham said, the Bill does not make it clear whether people can have more than a single saving gateway account in their lives and, if they can, the length of the period between the first and second account, if indeed there is such a periodperhaps they can overlap. There is a reasonable school of thought that perhaps the number should be limited, but it would be useful to have that discussion. If only one account is allowed in a lifetime, we can discuss the merits and demerits of that proposal. As it is, however, the whole proposal is so vague that the Economic Secretary is inviting us to endorse a scheme for which he could subsequently put in place almost any details that he wants. That is what I am uncomfortable with, and that is the reason behind the amendment.

Ian Pearson: I do not think that the proposal is vague; it is a sensible contingency plan. Without wanting to feel as if I am in repertory theatre, I shall rehearse some of the arguments that the hon. Member for Fareham invites me to rehearse about what should be in the Bill and what sensibly and prudently we should provide the Government with flexibility to do in future, should they be so minded. Amendments 7 and 30 would delete clause 6(5). Amendment 7, tabled by the hon. Member for Taunton, leaves it at the deletion, whereas amendment 30, tabled by the hon. Member for Fareham, would insert the words:
Regulations shall make provision preventing a person from holding more than one Saving Gateway account during the persons lifetime.
We are not ignoring advice from Sharon Collard, Brian Pomeroy and others with whom we have spoken and engaged on this matter. Our firm intention is that people should be limited to one saving gateway account per lifetime, as set out in the published draft regulations. Howeverwe come to the rehearsalwe believe that it is sensible to retain some flexibility, which is what subsection (5) provides. While not committing this or future Governments to any particular course of action, it provides the option of introducing regulations permitting people to have more than one account per lifetime, if that is thought desirable. Where that is the case, it would allow regulations to set a minimum period between accounts or a maximum number of accounts that may be held. Keeping open those options is sensible planning. It means that this and future Governments may keep the position under review and respond to the experience of operating the scheme and any other developments without the need for primary legislation. We have discussed that theme already.
That flexibility would be removed by amendment 30. Amendment 7 would also remove that flexibility, as well as any power to limit the number of saving gateway accounts that a person can hold, either consecutively or concurrently, which could increase dramatically the costs of the scheme and encourage people to recycle money into another account. It would be regressive, because it would allow eligible people who are able to save more to receive more. We believe therefore that it is necessary to be able to limit the number of accounts that people can hold through regulations, rather than in the Bill. We also believe that in framing such regulations, Governments should have the range of options set out in subsection (5) from which to choose, rather than specify in primary legislation that people can hold only one account, as the hon. Member for Fareham suggested. I repeat that it is our intention that individuals should have only one saving gateway account per lifetime, but I ask on a contingency basis that we have legislation that prudently allows the Government to change their mind at a later date, if future experience suggests that it is appropriate.

Mark Hoban: The Economic Secretary is better at arguing why there should be flexibility than he is at arguing the principle of why one account is the right number.

Ian Pearson: There is no debate about that.

Mark Hoban: If the case is cut and dried, why require that flexibility to be enshrined in legislation? One account sounds like the right number, although in his evidence, Brian Pomeroy suggested that someone might be allowed to have a second attempt under certain circumstancesif they had had to terminate their saving gateway account for reasons beyond their control, for example. I am not quite sure what reasons he had in mind, but there could be exceptional circumstances in which people would be allowed to have more than one account.
If the case is cut and dried, I find it hard to understand why the Economic Secretary cannot put it in the Bill. There are other areas where there is more debate such as the maturity period or the monthly contributionwhere the basis for leaving it to secondary legislation is much more robust. My other comment is that regulations relating to the first exercise of this power and the number of accounts will need to be approved through the affirmative procedure. My understanding of clause 27 is that if the Government decide at a later date to increase the number of saving gateway accounts that people can have, they would not require the use of affirmative procedure. The first use of this power would be approved, but not any subsequent use. Therefore, if the Government use affirmative procedure to agree on one accountas they will do when the regulations come before usthey could later decide to use the powers under subsection (5) to increase that number to 10. In that case, the affirmative procedure would not be used, although there would clearly have been a significant change in the Governments mind as to why they preferred a number higher than one.
The Economic Secretary should think about changing that, so that when the number of saving gateway accounts are increasedshould the Government seek to use that powerthat increase would be subject to the affirmative procedure rather than the negative. That would be helpful and, given the costs that might be attached to the change, it would give people confidence that there had been proper parliamentary scrutiny. I will leave that thought in the mind of the Economic Secretary, and beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

George Mudie: I should like to raise a matter that has been mentioned by the Economic Secretary. It is the example of a person going into a bank and not being allowed to open an account. The Economic Secretary specifically referred to money laundering. When we did an investigation on basic bank accounts, we found that the banks behaved very badlyintolerablytowards those individuals we were trying to encourage to open such accounts, which are the key to a great number of things. These people had to wait in separate queues and money-laundering regulations were cited to them. The staff did not advertise the basic bank accounts and when asked about that, said that they knew nothing about them.
I am conscious that there are individuals who are not used to saving or to going into banks, and who might easily be overawed, but who nevertheless goes inthat is the aim of the Billclutching proof of their identity and a letter from the Department saying that they are eligible for an account. I genuinely wonder whether asking questions about money laundering is simply a requirement that must be put in every piece of financial legislationif the Economic Secretary gives me a nod and confirms that as a reason, I will sit down straight away. If that is not the case, I think that it is a step too far.
You will have read The Guardian yesterday, Mr. Taylor. It said that FTSE 100 companies are avoiding tax of between £3 billion and £13 billion a year by moving money to overseas companies. Only two of the FTSE 100 companies would tell The Guardian what their tax arrangements were. I am not making the point that these companies were money laundering.

David Taylor: Order. The hon. Gentleman is wandering a little wide of the clause.

George Mudie: I was just on the point of bringing it back to that, Mr. Taylor. I will bring it back to the Department. Faced with that sort of money, its priority should be clawing some of it to give relief to the British taxpayer. On average, the people covered by the Bill will put in £4 per week or £25 a month. If we could confine money laundering to that amount and to that number of people, it would be at a level we could accept.
In the past, people were refused basic bank accounts. I am sure that the Minister will accept that the object of this exercise is to persuade people for the first time in their lives to go into a bank, open an account, stop all the worries and fears over a new environment and do something that will change their lives. I do not think that we want to make that more complicated than taking in the eligibility form and some identification, and getting them signed up as quickly as possible.

Ian Pearson: I do not want to make the process any more complicated than it needs to be. Some checks are required and it is a matter for the providers to decide what evidence they will accept as proof of identity or address. As my hon. Friend said, we are talking about relatively small sums of money. The money- laundering regulations are therefore not an appropriate model.
My hon. Friend referred to basic bank accounts. Industry and Government data suggest that there has been substantial progress on the provision of basic bank accounts. In the year to March 2007, 600,000 new accounts were opened. The Banking Code Standards Board has taken the view that work done by providers, the enhancements to the code and the monitoring carried out by the BCSB have led to basic accounts being more readily available. It goes on to say that where an individual is financially excluded, they should be able to obtain information and open a basic bank account relatively easily. A lot of work has gone into that. As a member of the Treasury Committee, my hon. Friend will be aware of the work that has taken place in this area.
We must consider carefully what lessons can be learned from the basic bank account when working on the design process for the saving gateway account. Our intention is not to put unnecessary obstacles in the way, so that the process is as simple as possible. We want to encourage people to save. The purpose of the Bill is to kick-start saving.

George Mudie: Does that mean that the Minister will look again at the draft regulation that states that a person can be refused an account if they do not satisfy money-laundering legislation?

Ian Pearson: I am advised that the money-laundering rules were introduced for good reason. It would not be sensible to disapply them for these accounts. As I indicated previously, the simple fact that we are talking about relatively low balances means that if banks are taking a risk-based approach in these areas, which one would expect them to do, they should not ignore money-laundering regulations. However, I do not think that they should necessarily be treating a saving gateway account as if it were going to have £10,000 or more going through it. It needs to be proportionate and we will continue to have dialogue with the banks and other potential saving gateway account providers on this issue. If we need to revisit the regulations before we debate them in this House we will certainly do so.

Question put and agreed to.

Clause 6 ordered to stand part of the Bill.

Clause 7

Transfers

Question proposed, That the clause stand part of the Bill.

David Taylor: With this it will be convenient to discuss new clause 1Transfers
The only circumstances in which a Saving Gateway account held with one account provider may be transferred to another is when the account provider is subject to the Banking Special Provisions Act 2008..

Mark Hoban: This is a probing new clause. It goes back to the evidence session we had last Tuesday afternoon, when it became clear in the conversations we had with the potential account providers that one of their concerns was the administrative cost of running saving gateway accounts. The income to the providers was quite limited and one of the factors they would need to think about was the cost of the operation of these accounts. When we probed them on this, one of the issues raised by Helen Banks of the British Bankers Association was transferability. She expressed the view that the ability to transfer accounts from provider to provider could add to the costs that they would face. Part of the challenge comes from the way in which saving gateway accounts are structured. If one transferred an account from one bank to another, the transferring bank might normally just need to provide name, address and balance at date of transfer, but for a saving gateway account, given the way in which the matching contribution is calculated, a bit more information is required, and that falls outside the banks normal systems. The banks who gave evidence said that the transfer process would probably have to be a manual workaround and, of course, that is always more costly than automated systems. Helen Banks made an argument against transferability, which certainly addressed cost-based issues around the account.

Stephen Ladyman: I take the hon. Gentlemans point that the evidence given to us was that there would be a significant cost in transferring these accounts and this is one of the simplicities that the bankers were looking for. Equally, I wonder whether it occurred to the hon. Gentleman that doing so would be anti-competitive since, if one of the banks decided to offer a more generous rate of interest on one of these accounts because it wanted to nurture a client base for the future, not allowing people to transfer would prevent them from taking their money out of a provider that was not providing that generous rate of interest.

Mark Hoban: I agree. The argument against transferability is quite strong on the grounds of competition. One could argue that the best way for banks and other providers to compete is on the sign-up process. Before someone takes out a saving gateway account, they could shop around among a range of providers to find out what the conditions are, what is offered in these accounts, whether or not they offer interest and what it is, and what is the default option when the account matures in two years. In that way, we could have all competition taking place up front before someone signs up to an account. However, as the hon. Member for South Thanet rightly pointed out, that means that once someone has been enticed into saving in that account they are locked in for two years, and it also prevents people switching to take advantage of a better rate.
There is a debate to be had on the extent to which people will transfer from one account to another and whether we are prepared to accept the trade-off between reducing the cost base of operating the accounts on the one hand, thereby potentially increasing their availability and the number of people prepared to offer them, and the anti-competitive element that that includes on the other. I am mindful of that debate, and those were the two arguments I considered when writing my notes.
As one who fervently believes in the importance of competition, I want to see as many account providers as possible. Indeed, I would like people to be able to switch between accounts, but if the costs of the transfer option are such that that restricts the number of providers, are consumers best served by that smaller number of providers even though they have the option of transferability? There is a tension between the number of providers and the question of whether they will be attracted to a system that will leave them to incur additional costs if people transfer from account to account, and it is important to explore that.
When potential account providers look at whether to enter the market, they will need to understand the cost basewe will talk about statements laterand clearly they will have to bear in mind some of those parameters and whether it is economically viable for them to run the account. We need to have that on one side and the consumer interest on the other. I have tabled the new clause to stimulate that debate: we heard the view of potential account providers and it would be helpful to hear the Minsters view.
I have included one proviso, because the one case in which we need to be able to transfer accounts from provider to provider occurs when a bank becomes insolvent. It could be forced into administration or the Government could take it over and transfer the accounts to another bank, as was the case with Bradford & Bingley. I am very conscious that next week Members will consider Lords amendments to the Banking Bill, but in lieu of that Bill being on the statute book, I have incorporated in new clause 1 a provision relating to the Banking (Special Provisions) Act 2008. As the Minister will know, many of the actions that have been taken to solve the banking crisis over the past few months have been taken under the ambit of powers in that Act, so it seemed a convenient reference to include for the purpose of the debate.
The new clause is intended to be probing and to tease out the issues relating to transferability and to how it could help consumer interests once someone has taken on an account by encouraging or enabling transferability. Equally, however, transferability might reduce the number of providers who come forward to provide the saving gateway accounts if it leads to additional costs. If there are fewer providers, that might impair the competition in the marketplace and make the accounts less attractive.

Ian Pearson: As nearly always, the hon. Gentleman has a point. The Government have to make judgments on what the best action to take is if we are to ensure a plurality of provision of saving gateway accounts on the one hand and the ability to ensure that transfers can take place when they are in the interests of individual savers on the other. Clause 7 addresses that, and new clause 1, which the hon. Gentleman has tabled in a probing manner, would place severe restrictions on the opportunity for transfers to take place and would clearly be defective within a couple of weeks when the Banking (Special Provisions) Act is superseded. However, this is an opportunity to show the Governments current intentions and underlying thinking, much of which is set out in the draft regulations.
We would not expect transfers to be frequent. Unlike child trust funds, these are short accounts lasting two years and, unlike ISAs, it is not likely that account holders will want to change providers regularly to obtain a better interest ratethe match payment will be the same with any provider and will be significantly larger than any return paid by the provider. However, we are attracted to saving gateway account holders having the option of transferring their accounts between providers. For example, an account holder may move and find that their current provider is no longer accessible. That is potentially the case for people moving within rural areas. However, we do recognise that this remains a concern for potential account providers, as the Committee heard in the evidence session.
The hon. Gentleman is right to say that there are, potentially, administrative costs involved in paper-based transactions, if transfers were to take place. That is one reason why we need to continue to discuss this matter in detail, as we mentioned in the explanatory notes to the draft regulations that we published. However, clause 7 would be required, whatever the outcome of those discussions. Even if transferability were not a requirement of offering saving gateway accounts, a mechanism for transfers would be necessary to cater for cases where the transfer is triggered by the account provider, rather than the account holder. For example, if an account provider were to choose to withdraw from offering saving gateway accounts, their accounts would need to be transferred. The same would be true if a provider had their approval withdrawn by Her Majestys Revenue and Customs or ceased to qualify as an account provider for any reason. In such cases, transferring the accounts to another provider would be the only way of ensuring that they could continue to account maturity, so that the account holders could receive their maturity payments.
The new clause would permit transfers to another provider, only in the circumstance that the saving gateway provider with which the account is held is subject to the Banking (Special Provisions) Act 2008. Our intention, as set out in the regulations, is broadly that a transfer may be made where an account holder wishes to move from one provider to another and that there should be no charge when an account holder wishes to do this. We understand that the complexity and potential costs involved remain a concern. I assure the hon. Gentleman that we will continue to discuss this matter in detail, as I have already said.
Let me explain why the new clause, although intended to probe, is limited in scope. It is subject to the Banking (Special Provisions) Act 2008, which, as Committee members know, gives the Government power to take a failing UK deposit taker into public ownership or to transfer its assets to another private sector body to maintain the stability of the UK financial system or to protect the public interest. That is a narrow set of circumstances and a provider could be subject to the Bill only in the specific circumstances that it sets out. The new clause would not permit transfers where, as I have said, a provider chose to withdraw from offering saving gateway accounts, and it would not permit transfers if a provider were to have its approved status removed, so it is defective as a piece of prospective legislation.

John Howell: If the Economic Secretary is saying that it is the Governments intention to facilitate transfers, I am a little surprised by regulation 19(3), which, since we do not know what the any necessary modifications mentioned in it are going to be, effectively means that a transfer account has to start again in going through the banks procedures, because those push it straight back into the regulation 13 requirements that we have already discussed, particularly in relation to my earlier amendment. I am surprised that the Economic Secretary is doing that. Does he accept that that also produces a potential conflict for a transferred account? It would be coming from a bank with one set of regulation 13 compliance for its own purposes to another that may have a completely different set and may not be willing to accept the account?

Ian Pearson: I do not have the particular regulation to hand, but I want to say in response to the hon. Gentleman that, as a Government, we currently intend that transfers should be allowed to take place, at no charge, where an account holder wishes to do that. It would clearly be up to the account provider to ensure that, if the transfer is taking place, the account holder is aware of the particular requirements operated as part of the providers saving gateway account and in undertaking the necessary checks. I shall look in detail at the regulation, but our current view is, clearly, that we want to see transfers, but that we are conscious of the potential costs involved. As I indicated, we are open to further discussions with the industry, because we want to make sure that the saving gateway scheme does not impose burdens on providers such that they might be put off from offering saving gateway accounts.

Stephen Ladyman: I understand where my hon. Friend is coming from, but I am worried about providing the banks with an opportunity to cop out. If they can build cost into the process of transferring between accounts, they will do that. We require electricity, gas, water and telephone companies to have procedures in place automatically to transfer accounts between customers at as a low a cost as possible and as quickly as possible. They are required to do that for competition purposes, so they keep the costs down. Admittedly, in my experience, they almost always screw it up when they do it, but nevertheless they are required to have those procedures in place. I do not see why it would be any different to require the banks to be able to transfer accounts between each other at as low a cost as possible. If the banks are expected to do that, they will make sure that the procedures are in place for it not to cost them too much money.

Ian Pearson: I understand my hon. Friends point, but I ask him to understand the situation with the banks. They will be offering accounts that, hopefully, will be taken up in significant volumes, but have relatively small sums of money deposited in them and are likely to involve procedures that would probably have to be paper-based andif there are significant transfers taking placecould well be expensive. That will affect their judgment as to whether they think it is worthwhile participating in the saving gateway programme. We are keen for them to do so, and we want to have discussions with them.
Clearly, it is in the best interests of savers if they can move around. We would like to see saving gateway accounts offering rates of interest, although there is no such requirement in the legislation. That is something that we shall probably discuss later on in the Committees deliberations. At the moment, we do not think that there will be significant drivers for accounts to be transferred, because as I have indicated it is the match that is clearly the most important thing here. We shall continue to have dialogue with the industry about that. We want to get to the bottom of how much cost really is involved, and whether it is a major problem, because it is something that we would like to see done.

Edward Timpson: To try to piece all this together, is the Minister saying as he did few moments ago that there should be no charge for transfer, under any circumstances? Or is he envisaging that, depending on the circumstances under which transfer took place, there will potentially be some charge to the account holder as opposed to the provider?

Ian Pearson: We have said that we want to see transfer at no charge to the account holder. Inevitably, if transfers are going to take place, there will be some costs to the account provider. The debate we are having with the industry is about how significant those costs are and whether they are likely to deter it from wanting to offer savings gateway products. We will continue to have that debate with the industry.
It is our firm view that it is desirable for transfers to take place. We do not expect them to be in any great numbers because of the nature of these accounts and because they are relatively short term, but we would like to have the flexibility so that consumers can undertake these transfers. That is why we want to continue to have dialogue with the industryit is important that we do so. As I indicated earlier, clause 7 is still necessary, whatever view one takes on transfers. It is an important part of the Bill.

Mark Hoban: I am grateful to the Economic Secretary for responding and in particular for pointing out that, notwithstanding the comments I have made about transferability, there would still be a need for clause 7 to be part of the Bill, given that there would need to be some regulations around transfers.
We have had a helpful debate about the costs. We talked about the benefits of the account to account holders and why it is important in terms of delivering a culture of savings to people who do not, currently, save much. This short debate has highlighted the importance of making sure that there are providers in place to provide those accounts and provide those opportunities for saving. While I focused on the area around transferability, hon. Members who took part in last Tuesdays evidence session will recollect that it was not just the banks who were concerned about the costs of operating these accounts; Adrian Coles of the Building Societies Association made a similar point, as did Mark Lyonette of ABCUL, about the cost of collection and cash handling. If we are to make sure that these accounts are available, it is important that the providers themselves see a purpose for providing these accounts and feel that it is beneficial to them to do so.
One of the issues that bedevils financial inclusion can be that often people come up with some good ideas for products that might meet the needs of consumers, but they do not come up with products that providers want to provide for a whole range of reasons. Ron Sandler, the chairman of Northern Rock, did a good report on some basic products, but unfortunately the design of those products means that no one is prepared to provide them. We need to think of both sides of the equation, which is part of the purpose of raising the issue around transferability this afternoon. We need to make sure that there are people out there who are prepared to provide these accounts.
The hon. Member for South Thanet spoke about perhaps encouraging the Post Office to be the sole provider. My concern would be that we would get a monopoly provider by default rather than design, if we do not get the product design right and make sure that the conditions are in place to encourage as many people as possible to provide those. That is the purpose around tabling new clause 1 and I am grateful that we have had the opportunity to have that debate this afternoon.

Question put and agreed to.

Clause 7 ordered to stand part of the Bill

Clause 8

Maturity payments

Mark Hoban: I beg to move amendment 32, in clause 8, page 4, line 31, leave out from is to end and insert 50 pence.
Clause 8 deals with the maturity payments that will be available to people who have opened savings gateway accounts and the payment that would be made at the end of two years. The familiar theme over the course of todays scrutiny is to insert one of the key features of this, which is the amount of the maturity payment which, we are all clear, is 50p in the pound. Rather than repeat the debate about why the Government want flexibility and why it is appropriate to specify the rate in regulations, rather than in the Bill, it might help the Committee to reflect on last weeks evidence sittings, in which witnesses gave their justifications as to why the amount should be 50p. That rate appeared to be sufficiently attractive to encourage people to save, although one witness suggested that it was extremely generous.
It would help if the Minister put on record the Governments rationale behind the 50p rate. He was not a witness last Tuesday, so this is the first chance since Second Reading that the Committee has had to probe his rationale. I sensed from last weeks witnesses, with the exception of those comments about 50p being extremely generous, that they thought it a sufficiently attractive rate to encourage people to save and to keep their money in the accounts for as long as possible. It would help if the Minister set out clearly the Treasurys thinking behind that amount.

Jeremy Browne: I rise to give my wholehearted support to the amendment for both reasons that the hon. Gentleman touched on. First, it is unacceptable to invite the Committee to endorse a Bill with all the numbers and details stripped out, leaving them able to be adjusted at any point by the Minister. That makes a mockery of the entire process of parliamentary scrutiny that we are sent here by our constituents to undertake. If the rate is to be 50p, and that is the amount of public money that the Government are committing, it seems reasonable that we should be able explicitly to endorse that.
I should also be interested to know how much the Economic Secretary thinks the overall scheme will cost. I appreciate that that will be an estimate, but it is necessary for us to be able to tell our constituents, and others who are interested, what the implications are for public spending, so that they can make a judgment, if they are interested in these matters, about whether the 50p rate is appropriate, not only as an incentive to savers, but in terms of cost to the taxpayer.
The hon. Gentlemans second point about the 50p rate is whether it is the minimum level at which we can maximise incentive. Is it providing value for money, or could we persuade as many people to save if it were 40p, therefore doing so at lower cost? Would there be a noticeable bounce in the number of people who would save if it were increased to 60p? If so, the scheme could be made much more attractive without reaching much further. That territory has not been explored sufficiently.
My final point, which I shall address in more detail when we discuss my amendments to this clause, is about how the 50p is triggered. That 50p, when put against a pound in the 24th of the 24 months, provides a good return in comparison with the 50p matched against a pound in the first of the 24 months. It might be possible for the Government to devise a scheme, which would admittedly be more complicated, whereby a pound that stayed in an account for the duration of the 24 months attracted the 50p, whereas a pound that was there for a shorter period would accrue at a monthly rate and therefore would not make up the full 50p. That system might or might not have merit, but we are currently being invited to endorse a measure that contains no figure whatever. We therefore cannot discuss the merits of the Governments proposal because they have not deemed it suitable to give us a proposal to support or vote on.

Ian Pearson: At the risk of starting a competition on how many music titles one can get into a speech, let me say that the song remains the same when it comes to whether matters are put into the Bill or are contained in secondary legislation. We think as a matter of principle that the match rate is more appropriately dealt with in secondary legislation, because in the light of events, as we evaluate how the saving gateway programme develops, we might want to increase or reduce it.

Jeremy Browne: The Economic Secretary said that he might wish at some point to increase or decrease the 50p match rate. Just to be clear, would that apply to new account holders, or would it be possible for someone to embark on a saving gateway account with a 50p match rate and then, at some point during that two-year period, for the Government to decide that it was wise to reduce it, for example, to 25p?

Ian Pearson: Again, the song remains the same. We do not want to speculate on what a future Government might want to do. I am just saying that as part of sensible contingency planning, any Government would want to include the match rate issue in secondary rather than primary legislation so that if circumstances and evidence indicated that the match rate was not generous enough or too generous, they could alter it without the need for primary legislation. We want to be clear that that would not be done retrospectively, particularly if a lower match rate was being introduced.
To return to the basic question about the 50p match ratewhether it is too high or too low, and why the Government came up with that figurethe first point to make is that our overall policy objective is to kick-start the savings habit. Then it must be asked what the most effective way is to do that. What level of incentive is required to encourage people to save? As the Committee will be aware, we gained information on that matter from the pilots. The second pilot showed that savers found a match rate of 50p for every pound to be a strong incentive to save. A lower match rate would clearly provide less of an incentive to save and would be likely to lead to lower take-up of saving gateway accounts.
The second pilot appears to show that a match rate of 50p for each pound saved made people 10 to 15 percentage points more likely to open an account than a match rate of 20p. Again, in designing saving gateway accounts, as a matter of policy, we had to make judgments about what level would be most likely to get people to participate. As hon. Members will be aware, one pilot looked at a pound-for-pound match rate. I do not think that the evidence suggested that the more generous match rate would produce significantly more savings. We thought that it was poorer value for money for the taxpayer in terms of encouraging our policy objective.
We are at the 50p rate, we believe that that is attractive and we want to continue on that basis. It will be in secondary legislation, which we will debate in due course. Undoubtedly we can rehearse the arguments again, but on the best evidence available from the pilots, our judgment is that 50p is the rate most likely to help kick-start the savings habit.
The hon. Member for Taunton finally asked how much it is likely to cost. That will clearly depend on take-up rates, but we currently score the cost of making the match payments at £130 million in 2012-13, £110 million in 2013-14 and £100 million in 2014-15. I hope that that provides him with the information he requested and that I have been able to clarify some of the Governments thinking behind our decision to have a 50p match rate. We continue to believe that that will be attractive to the target group, which is people of working age on low incomes. We want them to save and we believe that this will help them to do so.

Mark Hoban: I thank the Economic Secretary for his response. It is interesting to understand how the match rate incentivises people and the point at which the level of the match rate ceases to act as an incentive to people to save more. The fact that the pilots have confirmed that 50p is as effective in encouraging saving as £1 is useful evidence. That means that the cost to the Exchequer of introducing the measure will be less, and demonstrates that even at that lower cost, we still hope to have an effective result.

Jeremy Browne: I would be grateful if I could draw on the hon. Gentlemans greater experience as a Member of Parliament. His amendment asks the Government to put the 50p figure in the Bill and the Minister says that that will be dealt with by regulations and has justified the 50p level to the Committee. However, after the Bill has gone through all its stages in Parliament, will anything stop the Minister turning around and changing that figure to something else with a waft of his pen? If that is the case, why are we bothering to have this conversation about 50p, because we have been completely bypassed and the Minister need not pay any heed whatsoever to anything we say?

Mark Hoban: The hon. Gentleman makes an important point. Having raised the issue earlier about the difference between the first and second use of power in respect of an earlier debate, I have checked the matter. Each time the Government change the match rate they will have to bring forward a statutory instrument under the affirmative resolution procedure, so at least there is some parliamentary scrutiny in that way.
As the hon. Gentleman knows, we will not be in a position to amend the statutory instrument if we have different views about the level of the match rate, whereas if the measure were introduced through primary legislation, we could seek to make such an amendment. However, there is at least some parliamentary scrutiny through the affirmative procedure, which will ensure that the Minister cannot change the rate without having to come back to the House and explain his motives. A fail-safe is in place and we can take reassurance from that. I beg to ask leave to withdraw amendment 32.

Amendment, by leave, withdrawn.

Jeremy Browne: I beg to move amendment 8, in clause 8, page 4, line 32, leave out from second the to the in line 33 and insert
final account balance at the end of.
My amendments have been grouped so as to have a discussion on amendment 8, a separate discussion on 9 and 11 and a separate discussion on 10. I certainly wish to deal with amendment 10 separately because that is very much a different issue, but there is a degree of overlap between amendments 8, 9 and 11. I will try not to test your patience, Mr. Taylor, but if I touch upon those, I may not require to speak specifically to them when that moment comes.
The amendments are probing because what I am really seeking to explore is the incentive for people to save and feel that they are participating in a scheme that is fair in terms of their expectations. People should also feel that the scheme is fair when they make comparisons with other people in their community who they know are also participating, and it should offer the best value for money to the taxpayer.
Amendment 8 deals with the point at which the balance is calculated for the purposes of the 50p matching figure. If it is paid on the highest amount that was ever in the account, one could build up £300 in the first year, withdraw all of it or leave in a nominal sum of £1, put nothing in during the second year, and have the money coming later. However, that money would not be due until the whole two years have expired and a further unspecified period has lapsed, which is what we talked about in amendment 10.
However, if someone put £1 a month in for the first 18 months, for example, and then £25 a month in for the last six months, they would come up with a total of £168, which would provide an extremely generous return, given that the vast majority of the money had been tied up in the account for a limited period of time. That would not be a 50 per cent. annual return; it would be far more generous. That does not compare with how normal accounts reward people, because the £25 put in at the end of the last month would come up with a return of £12.50 within days of being deposited. The purpose of the amendment is to find the thinking behind how the Government calculate a reasonable means by which to calculate the 50p rate.
Amendments 9 and 11 look at a slightly different aspect. On Second Reading and at other points during our deliberations, we have said that the legislation has two related, if different, purposes. It tries to encourage people on low incomes to be more enthusiastic about making savings, even if they are modest. That gives people a stake in society, and allows them to build up some money to spend in their retirement or to make some other provision for the future. However, we also say that it would be inappropriate for that money to be tied down for the two-year period, not only because people might be disincentivised to participate, but because the money is meant to provide some sort of buffer against unexpected events. If a persons washing machine breaks down six months into the scheme, they might think, Crikey! I havent got any money to get this washing machine mended. They might then think, Wait a second. How fortunate. Ive got £150 because Ive saved up to the maximum for the first six months, and the washing machine repair man is charging £150 to put it right. Thank goodness I have that security that I wouldnt previously have enjoyed. Whats more, there are no restrictions on my ability to withdraw that £150 instantly. In that way, the scheme does not encourage people to have a long-term savings mentality, but it guards against shocks to the system in peoples short-term finances.
However, someone could be disadvantaged if they take such an approach because of how the 50p matching rate is attracted. If the rate could be calculated on the amount in the account on a monthly basis, or if there was a halfway point at which people could in effect bank the money that they had attracted in the first half of the two-year period, the scheme would be more complicated, but it would have the virtue of being fairer or less anomalous when people in different circumstances compared how they are treated by the 50p payout.
Amendments 8, 9 and 11 are all intended to tease out the Ministers thinking on that, and to give the Committee an opportunity to discuss the matter. I do not necessarily think that there is a right or wrong answer, or that I have arrived at such an answer, but I anticipate that if we do not explore the matter in some detail, some people may feel that the scheme is unreasonable when it comes into effect, and others may feel that they have benefited from it by rather more than the Government intended when the legislation was drafted.

David Taylor: Order. I allowed the hon. Gentleman to refer to other amendments in the interests of flexibility, but also in the expectation that when we come to those amendments, his contribution will be correspondingly reduced.

Mark Hoban: At the risk of the harmony between the hon. Member for Taunton and I, I am not sure that I support the amendment. One point that I have borne in mind from an evidence session last weekit crops up time and again from people working in the field of financial exclusionis the need for simplicity. People need to understand what they are signing up to, and the terms. That rubs up against the issue of fairness and the anomalies that he raised, and we need to take on board the fact that there may be some unfairness about the way in which the account might work. At the same time, we want to ensure that people understand what they are signing up to.
The greater the complexity about the allocation, matching and such things, the harder it will be for people to understand and the less willing they will be to take up the accounts. Someone who, through force of circumstances, was required to withdraw their funds early might be encouraged to leave in just £1. The account providers might remind people of that. At least such people would still qualify for the matching contribution at the end of the two years, even if they had to withdraw their money after nine months. There are mechanisms in place to ensure that they would still benefit from the measure, and one obligation that runs alongside the Bill is the duty to ensure that the account provider, or the third-sector organisations that encourage take-up, explain to people how they can avoid losing all their matching benefit.

Jeremy Browne: I seek clarity about the hon. Gentlemans understanding of the Bill, because I have some sympathy with what he says about complexity being a disincentive to participation. If a person saved up £325 in the first 13 months, and then withdrew £324, it would not, as I understand it, be worth their putting in £25 a month for the subsequent 11 months, because they would never get up to a high enough figure to qualify for any additional money. So, they might as well leave the pound and, for the last 11 months, put the £25 a month into an interest-bearing account elsewhere. Am I correct in thinking that once one has reached ones maximum limit and withdrawn money, it is not worth engaging in the scheme again?

Mark Hoban: The hon. Gentleman encapsulates the point neatly. We might say that the situation is a disincentive, but it is a possibility: someone might max out at 13 months, choose to withdraw all their money and recognise that there is no point in paying any more money into the account, because they will not receive any further matching contribution. That is one of the consequences of how the account is determined, because the matching is based on the maximumthe highestbalance on the account. If the hon. Gentleman had tabled an amendment stating that the match would be based on the amount deposited over the lifetime of the account, he would have got round the problem, but he has not.

Jeremy Browne: This is where I sought to provoke debate. One could, for example, rather match 2p at the end of month, but that certainly would not sound like a big incentive, even though it would come to largely the same amount for the pound deposited in month one; or, as a simpler half-way house, introduce a 25p matching at the end of years one and two. That would reduce the total benefits, because the money in year two would attract only half the funds of year one, but it might iron out the potential anomalies that I have mentioned. I am not saying that the idea is necessarily superior to the Governments proposal, but it is worthy of consideration.

Mark Hoban: I shall not attempt the maths on the hon. Gentlemans proposals, but all parts of the House agree that the 50p match would be effective in maximising take-up. If that were converted into a monthly amount, or into a higher amount for one year than for another, it would take us back to the problem of increased complexity. There is a trade-off between fairness and simplicity. We could have a much fairer way of matching but make the scheme much more difficult for people taking out the accounts to understand.
There is some power in terms of attracting savers by having a match of 50p at the end of two years rather than 2p a month, which does not sound worth the effort, whereas 50p at the end of two years does sound worth the sacrifice that saving £25 a month will involve for some households. As I said, there is a trade-off between fairness and simplicity, but if we make the products simple we are much more likely to get take-up. We should try to focus on that when designing the system.

Ian Pearson: I fully understand the points that the hon. Member for Taunton made. However, amendment 8, and 9 and 11, which I shall refer to brieflyI guarantee, Mr. Taylor, that my contribution to a subsequent debate on them will be vanishingly smallare simultaneously less generous and more complicated than the Governments proposal.
I have a great deal of sympathy with the comments of the hon. Member for Fareham when he says that we need to strike a balance between a simple system that people can understand and the potential dangers of a complicated, mathematical calculation that no one understands.
Clause 8(2) describes how the qualifying balance should be established. The Bill sets out that the qualifying balance will be the highest balance over the life of the account. We believe that that has the advantage of not penalising savers for making withdrawals, while simultaneously discouraging them from doing so. If a saver makes a withdrawal, the match payment they have earned so far will not be affected. However, they will have to pay the amount that they have withdrawn back into the account before they can earn any additional match payment, and, because of the monthly deposit limit, only accounts where no withdrawals are made will be able to earn the maximum match payment of £300.
The hon. Member for Taunton is right to say that if somebody saved the full amount for 13 months and then withdrew all but £1, there would not be an incentive for them to save in the saving gateway account because they would have already earned their full match. However, there will still be a strong incentive for them to keep the saving account open because they need to do so to qualify for the match.
The circumstances in which that situation might arise are likely to be rare. Less than 2 per cent. of participants in the pilots made withdrawals. Also, basing the qualifying balance on the highest balance over the life of the account has the advantage of not saying that if people have washing machines that break down, or if their financial circumstances change such that they desperately need the money, which is often the case, we should penalise them. In effect, the amendment would do that by saying that it is only the balance at the end of two years that is important. That is what it proposes.
The amendment may be designed to discourage withdrawals, but we do not think that they are likely to be common. Only 1 per cent. of participants in the first pilot and less than 2 per cent. in the second pilot made a withdrawal each month. The proposal does not make the calculation of the match simpler; it just makes it different and potentially less generous, which is why it should not be supported.
I will leave it there, because while I appreciate the hon. Gentlemans intention, if he reflects on this he will realise that his amendment would make the measure less generous to savers, which no one wants. It would certainly be more complicated to introduce the sort of formula that he suggests. I hope that he will not push the amendment to a vote.

Jeremy Browne: I attach great importance to the simplicity of the scheme, because even generous schemes that are difficult to understand disincentivise all people, particularly those who are not familiar with financial products of that type. I take the Economic Secretarys point; this was a useful short discussion. It would be simple to devise a better system with a more complicated mathematical formula, but we are dealing with regular human beings, rather than with people who might respond to circumstances that look good to a mathematician but might not work in the real world. The only caveat is that if, after two years with one of these accounts, people get into the savings habit, they might get a rude shock when they try to save with a normal institution and find that the system that they have become used to under the Government scheme does not apply in the real world of financial services. However, that is the Governments decision. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Jeremy Browne: I beg to move amendment 9, in clause 8, page 4, line 33, at end insert
(2A) An account holder shall qualify for a reduced maturity payment where a Saving Gateway account is closed after a period of twelve months but before the end of the maturity period.
(2B) The reduced maturity payment in relation to a Saving Gateway account shall be specified in regulations..

David Taylor: With this we may discuss amendment 11, in clause 8, page 5, line 1, leave out subsection (5).

Jeremy Browne: I have nothing further to add.

Ian Pearson: For the reasons I have previously outlined, we do not think that amendments 9 and 11 will add anything to the Bill. They detract from a simple way of calculating the matching rate. One key aspect of the matching rules for the saving gateway is that savers must wait until the end of the accounts two-year maturity period to receive the match payment, and nothing is payable if the account is closed before the end of that period. Account holders are therefore incentivised to continue saving for the full 24 months of the account. However, they can access their money at any time without losing any match payment that they have built up.
As we have just discussed, we believe that that is the correct approach. It is a simple rule that will help to foster the savings habit. I also remind the Committee that the experts who gave evidence last week were supportive of how the matching rules are likely to work, specifically that savers are able access to access their money at any time but can only access the match payment once the account has matured. On that basis, I hope that the hon. Gentleman will withdraw his amendment.

Jeremy Browne: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Jeremy Browne: I beg to move amendment 10, in clause 8, page 4, line 41, leave out from within to beginning and insert one month.
This amendment is slightly separate, so I will briefly speak to it. Subsection (4) states:
The account provider must pay the maturity payment
that is the figure that we have just been discussing
to the account holder within a period, prescribed by regulations, beginning with the end of the maturity period.
My amendment wants to replace a period with a specific period of one month. That seems to be a reasonable period to allow for the calculation to be made. After all, it is not a difficult calculation. We have just heard how simple it would be if the maximum figure were £300. It does not seem to be unduly onerous to ask someone to work out that half of £300 is £150 in a month. That money could then be given to the account holder.
People with restricted household finances who have saved quite small amounts of money may be suspicious of financial services products and be uneasy about participating in schemes even if they are Government schemes. They will be keen to see both the money that they have had tied up for two years and the rewards that the Government have promised as quickly as possible. A protracted delay will be deemed unacceptable, and it may discredit the scheme as a whole.
The hon. Member for Fareham said that if the 50p level was changed in the future, it would have to be done by statutory instrument. Although we would be able to decide whether the Governments alternative figure was an improvement, we would not be able to modify it. I do not know whether in future we could change the stipulated period for payment, or whether the regulations could be changed without reference to the House. Either way, seeing that the calculation is so simple, it is sensible to specify a maximum period of one month.

Ian Pearson: Certainly, we do not think that the period should be longer than one month. However, we do not think that it is necessary to put that in the Bill. The hon. Gentleman will be aware that the draft regulations propose that there should be a shorter period of 14 days. No doubt that matter will be debated when we place the regulations that specify the time period before the House and the other place. We will still want to discuss the matter further with industry, but I share his view that there should not be any delay in doing that. A relatively straightforward calculation process is involved. All I am saying is that rather than it is better to specify the time in regulations. At the moment, the regulations suggest that it should not be one month, but 14 days.
I hope that that gives the hon. Gentleman the assurances that he seeks. People will get their match paid to them promptly, which is what we all want to see.

Jeremy Browne: I do not doubt that the Minister and I, and probably all members of the Committee, share the same objectives. At the risk of sounding like a broken record, I will repeat the constant refrain that it is much more sensible for Members of Parliament not to decide on any of these matters in the Committee in which we have been sitting for four and a half hours. Such a forum is clearly inappropriate for making these decisions. They should be decided at a later date by Ministers in regulation.

Stephen Ladyman: I think that I can help the hon. Gentleman. I do not think that he has read clause 27. When the Economic Secretary says that these things are done by regulations, such regulations have to be put before Parliament and they are decided by a Committee, either by affirmative resolution, which means that the Committee has to discuss them, or by negative resolution, which means that the hon. Gentleman can pray against them and a Committee has to consider them, and they have to be passed by a resolution of both Houses of Parliament. It is quite clear and it is in clause 27, so I think that his concerns are met.

Jeremy Browne: I understand that. However, we could have bypassed many of this mornings deliberations, and those of this afternoon and later this week, and cut straight to the chase by voting on the figures that matter. At the moment, we are talking in more abstract terms, which I regret. Anyway, myself and others have made that point elsewhere in our deliberations. I share the Economic Secretarys basic objectives, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question put forthwith (Standing Orders Nos. 68 and 89), That the clause stand part of the Bill.

Question agreed to.

Clause 8 ordered to stand part of the Bill.

Clause 9

Statements etc.

Mark Hoban: I beg to move amendment No. 33, in clause 9, page 5, line 8, leave out paragraph (c) and insert
(1A) Account providers will be required to send statements to the holder at not less than 6 month intervals..
I have tabled amendment 33 to reduce the sense of abstraction in the Bill. I share the frustration of the hon. Member for Taunton that we have had to go through the process of tabling probing amendments to be able to tease out some principles and numbers underpinning the Bill, but I suppose that that is how Parliament works. I believe that the child trust fund was established on a similar principle of broad enabling legislation followed by statutory instruments. In fact, next Monday afternoon, I am down to debate a statutory instrument on the child trust fund, which shows, I suppose, that such regulations come up for discussion, from time to time, long after an Act ceases to be a live political issue.
The abstraction that I am seeking to reduce relates to the statements that providers are required to produce for account holders. That cropped up in the evidence session last week when we discussed the frequency of the requirement to produce a statement. Potential account providers talked about six months being an appropriate intervaland lo and behold that number appears in regulations. A balance needs to be struck between keeping consumers informed about their contributions and trying to reduce the cost of the provision of statements. Every time a statement is sent out, there are printing, paper and postage costs, which add to the cost of providing these accounts. For accounts with relatively few transactions, six months does not seem a bad interval for the provision of statements.
A point was raised about whether a statement was necessary and whether alternative ways of providing the information to customers could be found. Adrian Coles, from the Building Societies Association made that point when he gave evidence. He said that a passbook approach might be an alternative to a statement, because it would certainly provide much of the information requiredit would provide a balance at any point, show payments in and out of the account, and provide details of the account holder, such as name, address and postcode, and the closing balance on the statement date. The only piece of information that it would miss out, according to draft regulations, is a provisional calculation of maturity payments. If that requirement was not in the regulations, a passbook might be an appropriate alternative to a statement.
The banks made the comment that the more information prescribed in regulation, the more expensive the statement will be, and that a programme to calculate the estimated maturity payment would be needed. In a way, we should be relaxed that banks are big enough to bear some of those costs, but if credit unions were required to provide such information, it might add to their costs and reduce the attractiveness of those products to credit unions. Are the Government clear that six months is the absolute minimum, or could a longer period be used? Might Mr. Coless passbook proposal be an appropriate alternative to the provision of a statement?

Ian Pearson: Let me not reiterate the previous arguments about why this issue is better dealt with by regulations than in the Bill. There is a clear case that according to the framework of legislation, the principles should be in primary legislation and much of the technical detail in regulations. This matter falls into the latter category.
The hon. Member for Fareham mentioned the evidence of Adrian Coles of the Building Societies Association. He is therefore aware that we continue to have a dialogue with potential account providers and their representative bodies. There may be alternative methods of communicating with account holders, such as through passbooks, which he mentioned. It may also be possible by e-mail, although I require convincing that contact by e-mail will be sufficient. Many of the low-income groups that we are talking about kick-starting the saving habit among are unlikely to have easy internet access. However, the BSA made a valid point that we will continue to explore.
The draft regulations indicate that six months is the appropriate period. We think it right that regulations provide the flexibility to alter the frequency of statement issue. We also think it right that savers are made aware of the current balance on their accounts. We must get the appropriate information out to savers while keeping to a minimum the burdens involved in doing so for account providers. That is another matter where we must strike the right balance.
We will continue to talk to account providers, the BSA, credit unions and others. We will return to this matter when we debate the affirmative procedure that will introduce the necessary regulations.

Mark Hoban: From his answers, it is clear that the Economic Secretary is aware of the tensions in this issue such as the trade-off between providing information to account holders and the cost of doing so. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Edward Timpson: I beg to move amendment No. 37, in clause 9, page 5, line 8, at end insert
(d) specify that a statement may be sent electronically..
The intention of the amendment was touched on by the Economic Secretary in his previous answer. I tabled it to highlight that the Bill and the attached regulations do not provide account providers the option to provide statements in electronic form. That is not to say that that should be the only form in which they could provide the statement. That could be done only with the consent of the account holder because not everybody has access to e-mail or to online banking.
The intention of the Bill is not only to encourage saving and make it more accessible, but to keep the costs down in the provision of the accounts. Allowing electronic statements would fit those principles. The findings of the pilots tell us that, generally, people were happy with the information that they received in their statements. However, there was an issue with timings. It was felt that statements tended to be a few months behind when they arrived. When people were making their final deposits, they were receiving statements for deposits made a month or two earlier.
The amendment would ensure that account holders were given up-to-date information about their account and felt some ownership of it to generate that sense of saving. It would also reduce the costs to the account providers who told us in the evidence sessions that their overheads in providing these accounts are extremely high compared with other similar accounts. That is a clear objective of the amendment. I hope that the Economic Secretary will take it into account when considering what is best for the provision of these accounts and the people they are meant to assist.

Ian Pearson: To promote a saving culture, we believe that it is important that account holders can see their savings and their maturity payment building up over a period of time to demonstrate the benefits of having saved. We discussed this on amendment 33. I hope that I can assure the hon. Gentleman that it is not necessary or appropriate to include amendment 37. As he will have seen from the draft regulations, we do not intend to specify the form that statements have to take, but simply that they must be issued. This would permit them to be issued electronically and it would be a matter for the account provider to decide. He mentioned the ability to allow account providers to do that.
I draw a distinction between the suggestion that all saving gateway statements should be sent electronicallyI can appreciate the environmental appeal of doing something like thatand the requirement that they have to be. I believe that there should be options here. Some account holders may prefer to receive their statements in a hard copy. I do not think that as a Government we should prevent that. We should also be mindful of the fact that not everyone has easy access to e-mail, so electronic communication could be very difficult. While I am sympathetic to the hon. Gentlemans suggestion, I do not believe that the amendment adds anything to the Bill. Certainly this will all be contained in regulations. The way we intend to frame the regulations would permit statements to be sent electronically if that was felt the most appropriate way of contacting account providers. I hope he will feel able to withdraw his amendment.

Edward Timpson: I am grateful to the Economic Secretary for clarifying the position in relation to electronic statements. It is clear from his answer that there will be the option for account providers to provide account holders with that facility. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 9 ordered to stand part of the Bill.

Clause 10

Account ceasing to be Saving Gateway account

Question proposed, That the clause stand part of the Bill.

Mark Hoban: Will the Economic Secretary spend a few moments outlining the purpose of the clause? There are only two sentences. The explanatory notes do not make clear what the purpose of the clause is. Is it about when there is an action on behalf of the account holder and that means that the account ceases to be a saving gateway account? Is it an action on the part of the provider? I should be grateful for some clarification as to exactly what the clause entails.

Ian Pearson: I am happy to provide clarification to the Committee. The clause gives the Treasury the power to make regulations specifying when an account will cease to be a saving gateway account. Once an account ceases to be a saving gateway account, it will no longer be subject to the features of such accounts such as the monthly contribution limits, the ability to earn a Government contribution on savings and the tax-free status. The Government intend to make regulations specifying that an account will cease to be a saving gateway account for the purposes of paying the Government contribution, when that contribution has been paid to the account holder.
For all other purposes, accounts will cease to be saving gateway accounts at the end of the maturity period. In practice, that means that an account will no longer be bound by the requirements set out under clause 4, such as the monthly contribution limit from the end of the maturity period. Of course, no match payment will be earned on deposits made after that point. However, the account holders entitlement to the match payment will continue until they receive the match.
Accounts will also cease to be saving gateway accounts if the account holder dies before the end of the maturity period. Those details have, in my view, been rightly left to secondary legislation as it is considered that that technical level of detail is not appropriate to primary legislation. That also allows flexibility, if experience of operating the national scheme suggests that changes need to be madea point with which we are very familiar.
Members of the Committee will be interested to know what will happen to the savings and match payment when a saving gateway account matures. We shall obviously discuss that in more detail when we reach clause 16, but it might be helpful if I explain briefly what will happen. We believe that savers should be able to choose what happens to their money, so that there is no specified end use for the money built up in a saving gateway account or for the maturity payment. We do, of course, hope that many account holders will choose to keep the money in a savings account of some sort and continue saving. The evidence of the pilot showed that many will. We shall also be amending the ISA regulations so that saving gateway account balances and maturity payments can transfer to an ISA as a transfer of previous years subscriptions, meaning that it will not count towards an individuals normal annual subscription limits for the year in which the transfer is made. I hope that I have provided some clarification of the Governments intentions with regard to how the regulations will operate.

Question put and agreed to.

Clause 10 ordered to stand part of the Bill.

Clause 11

Returns of information to HMRC

Mark Hoban: I beg to move amendment 34, in clause 11, page 5, line 34, leave out from within to end of line 34 and insert one month.
The amendment is straightforward. The clause concerns the return of information to Her Majestys Revenue and Customs and subsection (4) is about the payment from HMRC to the account provider to reimburse them for the maturity payment. We are keen for account providers to make prompt payment to account holders, but it would be nice for a similar requirement to be placed on HMRC, so that the account providerssome of which could be relatively small operations such as credit unionsare not out of pocket for too long. That is why we propose that the payments be made within one month. It is a perfectly reasonable obligation to impose on HMRC, given that it would be keen to make sure that the account providers themselves cough up quickly to account holders.

Ian Pearson: Again, the Government share the hon. Gentlemans desire to see prompt payment. As I said to the hon. Member for Taunton in our discussion on an earlier amendment, the Government want to make speedy progress in such areas. The amendment would fix the period for the payment at one month. However, draft regulations provide that, subject to checking and correction of claims and any further information required to verify a claim, the commissioners will settle timely claims from account providers within seven days. That will enable providers to receive payment from HMRC before they pass it on to account holders.
When the return and claim are submitted late or further information is required to verify a claim, the commissioners will settle the claim subject to checking and correction within seven days of the receipt of the claim or information. No doubt, the matter will be debated when we place the regulations that will specify the time period before the House and the other place. Again, the amendment is a technical detail and it is not appropriate to be put in the Bill, but it is clearly appropriate to question the Governments intentions in that area and to ensure prompt settlement. I hope my remarks on the envisaged time scales, which we intend to include in regulations, assure the Committee that we will take prompt action.

Mark Hoban: I am delighted that the Governments plans are even more ambitious than my amendment in ensuring that payments are made to account providers quickly. I was slightly suspicious of the after-the-checking part of the Ministers answer. When I talk to businesses in my constituency, often it is the checking bit that delays the payments of their invoices. It is used as a technique to manage cash flow, rather than to undertake detailed work to check whether an invoice is correct. I am sure that HMRC will not approach it in that way and will ensure that the checking is done expeditiously, so that the account providers can be reimbursed within seven days. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 11 ordered to stand part of the Bill.

Clause 12

Returns of information to HMRC

Question proposed, That the clause stand part of the Bill.

George Mudie: I rise to ask the Economic Secretary if he will tell the Committee the meaning of subsection (2). When certain benefits were moved from the DWP to HMRC, it was clear that the philosophy, ethos and rules of HMRC differed from those of the DWP. Customers were treated differently in terms of money pulled back, appeals and so on. The subsection seems to say that certain moneys in saving gateway transactions, at some stage, can be regarded as taxable. That strikes a chord of worry with me: it is a continuation of the problems that we have had with HMRC over tax credits and the like. I note that the appeals procedure, which we will come to, relates only to subsection (3), not subsection (2). I want an explanation of what that is about and what it covers. If there is a disagreement over any part of this about sums being pulled back and such, can the Economic Secretary assure me that there will be a proper appeals procedure covering everything?

Ian Pearson: Subsection (2) enables regulations to be made treating any sums wrongly paid as tax charged in an assessment for the purposes of part VI of the Taxes Management Act 1970. It permits regulations to be made allowing HMRC to collect those sums in the same way that it collects sums of tax due, using the provisions relating to collection and recovery of tax that are contained in part VI of the Taxes Management Act. The power is exercised in paragraph (5) of draft regulation 20. The situation is as my hon. Friend alludes to. He rightly raises the probing question about whether we are applying tax legislation to the recovery of those amounts and why, because they are not tax.
In practice, any sums that are to be recovered by HMRC in relation to saving gateway accounts will be dealt with by the same staff who recover HMRC debts generally. The application of part VI of the Taxes Management Act allows those staff to make use of the normal collection and recovery powers used to collect tax. The same approach, of treating sums to be recovered for the purposes of part VI of the 1970 Act as though they were tax due, is also used, for example, when recovering sums in relation to child trust funds and tax credits. My hon. Friend rightly makes a number of points about those areas. What we are doing is regarded as quite normal, but obviously we hope that the situations in which the overpayments might arise will be extremely few.

George Mudie: That is a worry. I understand that we have had great trouble with the issue in the Treasury Committee with HMRC. They have caused mayhem and much trauma to people throughout the country. The Economic Secretarys response is that tax people or collectorsInland Revenue or whatever they are dressed up ashave no sophistication when it comes to getting the money back. They demand the money back and they want it back in their period, their time, and they do not regard the personal circumstances of the individuals concerned at all. We also found with tax credits that there is no right of appeal. Those are the two things.
I would be very concerned if the Economic Secretary is confirming that an overpayment in this area is going to be dealt with under the tax regulations as I described. Secondly, there will be no appeal against overpaymentsthat is the important thing. The Economic Secretary and the Department can pull back the money if they wish, if they feel that they have a case, but the customer should at least have the right to go to an appeal on the merits of the case.

Ian Pearson: The situation as I understand it is that the Bill will give to the Treasury a power to make regulations to recover any overpayments made. Where an overpayment has been made, HMRC would consider the facts and circumstances of a particular case, to assess whether it was appropriate to recover any overpayments made. We are clear that we are dealing with people on low incomes and that we are talking about relatively small sums of money, and I would hopeindeed, expectthat HMRC would be extremely sensitive to such circumstances as we are talking about. What we are doing in subsection (2) is simply applying the normal collection and recovery powers. I know my hon. Friend has issues about how they might be applied in other areas, but it is right for us to have the powers. He correctly asks us to make sure that those powers are used in a sensible and proportionate way, which is what we would want to do.

Question put and agreed to.

Clause 12 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned.(Mr. Blizzard.)

Adjourned till Thursday 5 February at Nine oclock.